The effect of twitter dissemination on cost of equity: A big data approach

Albarrak, Mohammed S., Elnahass, Marwa, Papagiannidis, Savvas and Salama, Aly (2020) The effect of twitter dissemination on cost of equity: A big data approach. International Journal of Information Management, 50. pp. 1-16. ISSN 0268-4012

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Reducing information asymmetry between investors and a firm can have an impact on the cost of equity, especially in an environment or times of uncertainty. New technologies can potentially help disseminate corporate financial information, reducing such asymmetries. In this paper we analyse firms’ dissemination decisions using Twitter, developing a comprehensive measure of the amount of financial information that a company makes available to investors (iDisc) from a big data of firms’ tweets (1,197,208 tweets). Using a sample of 4131 firm-year observations for 791 non-financial firms listed on the US NASDAQ stock exchange over the period 2009–2015, we find evidence that iDisc significantly reduces the cost of equity. These results are pronounced for less visible firms which are relatively small in size, have a low analyst following and a small number of investors. Highly visible firms are less likely to benefit from iDisc in influencing their cost of equity as other communication channels may have widely disseminated their financial information. Our investigations encourage managers to consider the benefits of directly spreading a firm’s financial information to stakeholders and potential investors using social media in order to reduce firm equity premium (COE).

Item Type: Article
Uncontrolled Keywords: Big data, Cost of equity, Disclosure, Dissemination, Twitter
Subjects: G500 Information Systems
P100 Information Services
P900 Others in Mass Communications and Documentation
Department: Faculties > Business and Law > Newcastle Business School
Depositing User: Elena Carlaw
Date Deposited: 06 Nov 2020 08:43
Last Modified: 31 Jul 2021 13:20

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